The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

was down 20% on Wednesday morning after issuing dismal guidance. The share price is now back to where it was in late 2009. Omnivision shares are also limping at 2009 levels, in addition to declining over the past six months. The same applies to RFMD. And Triquint. Many of the contract manufacturers and component vendors that were supposed to ride to glory on the smartphone market explosion back in 2009 never managed to really latch on.

This is a major disappointment, because global smartphone volume growth remains robust. Gartner pegged 3Q13 smartphone sales to end users during autumn as nearly 46% above the level of the previous autumn. But that growth is increasingly fueled by South-East Asia, Africa and Latin America, where the volumes are driven by sub-$200 smartphones that are bought as replacements for feature phones. The rapid average sales price decline now defining the global smartphone market is boosting sales of cheaper components at lower margins. At the same time, many contract manufacturers are facing collapsing orders from clients like Motorola and BlackBerry. The enormous market share gains by and Samsung since 2009 have handed them massive negotiation power over both contract manufacturers and component vendors. As a result, even iPhone-linked names like Omnivision or Triquint never took off.

What is connecting with US tech investors is a pair of mobile app vendors - Zynga and . Both are up by roughly 50% in the past six months despite decidedly sketchy track records. Zynga has essentially fumbled the big lead it had in social gaming with its badly managed transition to mobile apps. Glu Mobile has had some notable hits like Deer Hunter 2014 - but considering its deep history in mobile gaming it is astonishing that this company does not have more traction in the mobile app revenue charts.

Yet no matter how dodgy the recent track records of Zynga and Glu are, they benefit greatly from the simple fact that there is extreme scarcity of listed mobile app vendors in the US stock exchanges. Global app revenue is growing at more than 40% annualized rate, but most of the listed companies are in Japan, Korea and China, markets where few US investors dare to venture. As highly successful money machines like King and LINE approach their IPO's, sector hype continues to grow, while US options for investing in mobile entertainment software remain strictly limited.

Colopl's oddball witch quiz blockbuster

Interestingly, Glu Mobile just announced a deal with Colopl to coproduce a Japanese game. According to app industry analytics powerhouse App Annie, the Japanese mobile app market size overtook American app market in October. The Japanese app market continues growing far faster than the US market. Colopl has recently emerged as one of the leading Japanese vendors, surprising industry observers recently with the longevity and revenue generation power of several of its franchises, including a quiz RPG and a baseball game. Its share price has nearly tripled since August. Shockingly, Colopl now has two games in the Japanese Top 4 list of biggest iPhone revenue generators - a major turning point for the company that was distinctly second-tier last year.

As the Japanese app market continues growing in global relevance, Western vendors have started forming links to the local players, most notable recent matches being Supercell-GungHo, -KLab and now Glu-Colopl. Having a Japanese hit would have a big impact on sales of a company like Glu or Zynga. On the other hand, Japanese app companies need Western break-outs to justify their nosebleed valuations.

It's possible that the recent share price spikes of vendors like Zynga, Glu and Colopl are driven by investor expectations of deeper West-East collaborations and resulting revenue growth acceleration. This is highly speculative - but as we have learned in recent years, so were hopes of profit growth of most smartphone component vendors.